Mapletree Logistics Trust - UOB Kay Hian 2017-04-28: 1Q17 Results Of MLT In Line

MAPLETREE LOGISTICS TRUST M44U.SI

REITs − Singapore - 1Q17: Results Of MLT (In Line)

MLT’s results are in line with expectations. Portfolio rental reversions were at +0.4% in the quarter. Management remains cautiously optimistic on its outlook due to its well-diversified portfolio.
Maintain BUY on MLT with an unchanged target price of S$1.20.

Results in line; maintain BUY with unchanged target price of S$1.20, based on DDM (required rate of return: 6.7%, terminal growth: 1.1%).
MLT reported 4QFY17 DPU of 1.86 S cents, up 3.3% yoy. The quarter saw gross revenue and NPI increase by 9.1% yoy and 10.5% yoy respectively, on the back of full-quarter contribution from an Australia asset, its Toh Guan asset in Singapore and a stronger HKD against the SGD.
4QFY17 distributable income increased by a slower 4.1% yoy due to higher distributions to perp holders. The results were in line with expectations, forming 101.4% of our full-year DPU estimates.
Overall portfolio rental reversions hit +0.4% in 4QFY17. Portfolio value of S$5.5b up 9.3% yoy, bolstered by acquisitions in Australia, Malaysia and Vietnam. We note that the Singapore portfolio saw slight revaluation loss of 0.8%, even after accounting for the divestment of 20 Old Toh Tuck Road.

The REIT manager intends to begin a phased S$70m redevelopment of Ouluo Logistics Centre in Shanghai (Phase 1: May 17, Phase 2: Oct 18). The redevelopment will increase the project’s GFA by 143.5% to 80,708 sqm, with Phase 1 and 2 to complete by 2QFY19 and 4QFY20 respectively. In Singapore the ongoing S$100m redevelopment of 76 Pioneer Road is slated for completion by end-17.
Pro-active leasing efforts resulting in well-spread out lease expiry profile, with 17.5% and 21.4% of total leases by NLA expiring in FY18 and FY19 respectively. Of these expiring leases, China accounts for 5.5% and 4.1% in FY18 and FY19 respectively.

We note that the callable date for 2012’s issuance of perps (S$350m at 5.375%) is due in Sep 17.
Assuming refinancing rate of 4.18% (MLT’s S$250m perp issuance rate in May 16), reissuance could imply cost savings of S$3.5m for every 1ppt decline for MLT.

Management seemed stoically upbeat on forward performance, pointing to its diversified portfolio and well-spread lease expiry profile. This is also notwithstanding more manageable SUA expiries (2.9% and 4.9% in FY18 and FY19 respectively). However, management also has acknowledged that a challenging leasing environment continues to place downward pressure on occupancy and rents.
Management noted transitory downtime in Singapore and South Korea, especially as it works to backfill the space left behind by South Korean tenant KPPC in end-16 (former top tenant accounting for 1.9% of gross revenue).

Management highlighted target markets Vietnam and Australia (expanding Australian footprint beyond Sydney). MLT currently derives about 69% of overall asset value from its overseas assets.

Derek Chang UOB Kay Hian | Vikrant Pandey UOB Kay Hian | http://research.uobkayhian.com/ 2017-04-28

UOB Kay Hian SGX Stock Analyst Report BUY Maintain BUY 1.200 Same 1.200